THE world’s first ever decentralised bank could soon become a reality if a Bitcoin billionaire’s plans come to fruition.
The unique bank is set to be based in Malta and is backed by Chinese-Canadian businessman Changpeng Zhao, founder of ‘Binance’ – the world’s largest cryptocurrency exchange.
According to Bloomberg, plans for the decentralised, community-owned bank have already received significant banking from both Binance and the Maltese government, which has invested a five per cent stake in the venture worth €133million euro (£117.54million).
The decentralised institution, called Founders Bank, will not belong to any single corporation, person or entity.
Instead it will be owned in part by anyone who purchases a portion of its token-based equity.
Founders Bank will have systems based on blockchain technology and will partner with fundraising platform Neufund to issue its own “legally-binding” equity tokens, according to Binance.
The idea of decentralised services is not unique, as it is essentially trading services without a middleman, and with a decentralised system built to accept the opinions and input of all its users.
In March, Maltese Prime Minister Joseph Muscat tweeted that he had high hopes for his country’s role within the blockchain industry.
He said: “We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies,” Muscat wrote.
Bitcoin’s meteoric rise in value over the past year has made early investors in the cryptocurrency incredibly wealthy.
The virtual currency was created in 2009 by an unknown computer whizz who went by the alias Satoshi Nakamoto.
Individual Bitcoins are created by computer code and their total value is believed to be in excess of £185billion.
As transactions are made without middlemen, there are no fees and you don’t even need to give your real name.
With more and more businesses worldwide now accepting Bitcoin as a payment method, it was only a matter of time before the cryptocurrency had its own bank.
Bitcoins aren’t printed currency, like pounds, dollars or euros.
They are instead produced (or generated) by people or businesses via computers worldwide.
The value of Bitcoin, like all currencies, is determined by how much people are willing to exchange it for.
To process Bitcoin transactions, a procedure called ‘mining‘ must take place, which involves a computer solving a difficult mathematical problem with a 64-digit solution.
For each problem solved, one block of Bitcoin is processed.
In addition, the miner is rewarded with new Bitcoin.
To compensate for the growing power of computer chips, the difficulty of the puzzles is adjusted to ensure a steady stream of new Bitcoins is produced each day.
There are currently about 16million in existence.
The Bitcoin protocol – the rules that make Bitcoin work – say that only 21 million Bitcoins can ever be created by miners.
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However, these coins can be divided into smaller parts with the smallest divisible amount one hundred millionth of a Bitcoin.
These fractional Bitcoins are called Satoshis, after the cryptocurrency’s creator.
While Bitcoin is the first decentralised ledger currency, there are more than 1560 other cryptocurrencies currently available on the internet.
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